Discussion and Reconciliation of Non-GAAP Measures for Continuing Operations

We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with U.S. generally accepted accounting principles (GAAP).

On April 8, 2022, we completed the previously announced separation of our WarnerMedia business. With the separation and distribution, the WarnerMedia business met the criteria for discontinued operations in the second quarter of 2022. For discontinued operations, we evaluated transactions that were components of AT&T’s single plan of a strategic shift, including dispositions that may not have individually met the criteria due to materiality, and have determined discontinued operations to be comprised of WarnerMedia, Vrio, Xandr and Playdemic Ltd. (Playdemic). These businesses are reflected in our historical financial statements as discontinued operations, including for periods prior to the consummation of the WarnerMedia/Discovery transaction. The information below refers only to our continuing operations and does not include discussion of balances or activity of WarnerMedia, Vrio, Xandr and Playdemic.

Free Cash Flow

Free cash flow is defined as cash from operations and cash distributions from DIRECTV classified as investing activities minus capital expenditures and cash paid for vendor financing (classified as financing activities). Free cash flow after dividends is defined as cash from operations and cash distributions from DIRECTV, minus capital expenditures, cash paid for vendor financing and dividends on common and preferred shares. Free cash flow dividend payout ratio is defined as the percentage of dividends paid on common and preferred shares to free cash flow. We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including capital expenditures and vendor financing, and from our continued economic interest in the U.S. video operations as part of our DIRECTV equity method investment, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions
	Third Quarter						Nine-Month Period
	2022			2021			2022			2021
Net cash provided by operating activities from continuing operations1	$	10,094		$	9,310		$	25,464		$	29,093
Add: Distributions from DIRECTV classified as investing activities	567			—			2,205			—
Less: Capital expenditures	(5,921)			(4,470)			(15,397)			(12,051)
Less: Cash paid for vendor financing	(900)			(1,019)			(4,237)			(4,013)
Free Cash Flow2	3,840			3,821			8,035			13,029
Less: Dividends paid	(2,010)			(3,748)			(7,845)			(11,319)
Free Cash Flow after Dividends	$	1,830		$	73		$	190		$	1,710
Free Cash Flow Dividend Payout Ratio	52.3		%	98.1		%	97.6		%	86.9		%
1Includes distributions from DIRECTV of $392 in the third quarter and $1,429 in the first nine months of 2022.
2For Standalone free cash flow see Exhibit 99.4.

Cash Paid for Capital Investment

In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. We present an additional view of cash paid for capital investment to provide investors with a comprehensive view of cash used to invest in our networks, product developments and support systems. 

Cash Paid for Capital Investment
Dollars in millions
	Third Quarter				Nine-Month Period
	2022		2021		2022		2021
Capital Expenditures	$	(5,921)	$	(4,470)	$	(15,397)	$	(12,051)
Cash paid for vendor financing	(900)		(1,019)		(4,237)		(4,013)
Cash paid for Capital Investment	$	(6,821)	$	(5,489)	$	(19,634)	$	(16,064)

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) – net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP.

EBITDA service margin is calculated as EBITDA divided by service revenues.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing cash generation potential with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which management is responsible and upon which we evaluate performance.

We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Mobility business unit operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

2

There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. For market comparability, management analyzes performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Third Quarter				Nine-Month Period
	2022		2021		2022		2021
Income from Continuing Operations	$	6,346	$	5,019	$	16,246	$	18,574
Additions:
Income Tax Expense	908		1,296		3,857		4,456
Interest Expense	1,420		1,627		4,548		5,090
Equity in Net (Income) Loss of Affiliates	(392)		(183)		(1,417)		(159)
Other (Income) Expense - Net	(2,270)		(1,522)		(6,729)		(6,958)
Depreciation and amortization	4,514		4,457		13,426		13,352
EBITDA	10,526		10,694		29,931		34,355
Transaction and other costs	58		8		341		43
Benefit-related (gain) loss and other employee costs	16		(4)		217		(108)
Assets impairments and abandonment and     restructuring	114		105		745		105
Adjusted EBITDA1	$	10,714	$	10,803	$	31,234	$	34,395
Less: Video and Other dispositions	—		(568)		—		(3,811)
Standalone AT&T Adjusted EBITDA2	$	10,714	$	10,235	$	31,234	$	30,584
1 See page 5 for additional discussion and reconciliation of adjusted items.
2 See Exhibit 99.4 for reconciliation of Standalone AT&T Adjusted EBITDA.

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Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Third Quarter						Nine-Month Period
	2022			2021			2022			2021
Communications Segment
Operating Income	$	7,631		$	7,168		$	21,886		$	21,983
Additions:
Depreciation and amortization	4,184			4,114			12,423			12,253
EBITDA	11,815			11,282			34,309			34,236
Total Operating Revenues	29,131			28,218			86,702			84,524
Operating Income Margin	26.2		%	25.4		%	25.2		%	26.0		%
EBITDA Margin	40.6		%	40.0		%	39.6		%	40.5		%
Mobility
Operating Income	$	6,419		$	5,987		$	18,484		$	18,038
Additions:
Depreciation and amortization	2,042			2,035			6,118			6,072
EBITDA	8,461			8,022			24,602			24,110
Total Operating Revenues	20,278			19,138			60,279			57,108
Service Revenues	15,337			14,527			45,065			42,921
Operating Income Margin	31.7		%	31.3		%	30.7		%	31.6		%
EBITDA Margin	41.7		%	41.9		%	40.8		%	42.2		%
EBITDA Service Margin	55.2		%	55.2		%	54.6		%	56.2		%
Business Wireline
Operating Income	$	882		$	1,002		$	2,451		$	3,151
Additions:
Depreciation and amortization	1,342			1,304			3,954			3,875
EBITDA	2,224			2,306			6,405			7,026
Total Operating Revenues	5,668			5,938			16,903			18,036
Operating Income Margin	15.6		%	16.9		%	14.5		%	17.5		%
EBITDA Margin	39.2		%	38.8		%	37.9		%	39.0		%
Consumer Wireline
Operating Income	$	330		$	179		$	951		$	794
Additions:
Depreciation and amortization	800			775			2,351			2,306
EBITDA	1,130			954			3,302			3,100
Total Operating Revenues	3,185			3,142			9,520			9,380
Operating Income Margin	10.4		%	5.7		%	10.0		%	8.5		%
EBITDA Margin	35.5		%	30.4		%	34.7		%	33.0		%
Latin America Segment - Mexico
Operating Income	$	(63)		$	(130)		$	(247)		$	(393)
Additions:
Depreciation and amortization	164			157			494			452
EBITDA	101			27			247			59
Total Operating Revenues	785			724			2,283			2,043
Operating Income Margin	-8.0		%	-18.0		%	-10.8		%	-19.2		%
EBITDA Margin	12.9		%	3.7		%	10.8		%	2.9		%

4

Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often-significant impact on our results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income. Prior periods have been recast for consistency to include gains on benefit-related and other cost investments.

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, in these cases we use the actual tax expense or combined marginal rate of approximately 25%.

Adjusting Items
Dollars in millions
	Third Quarter				Nine-Month Period
	2022		2021		2022		2021
Operating Expenses
Transaction and other costs	$	58	$	8	$	341	$	43
Benefit-related (gain) loss and other employee-related        costs	16		(4)		217		(108)
Assets impairments and abandonment and     restructuring	114		105		745		105
Adjustments to Operations and Support Expenses	188		109		1,303		40
Amortization of intangible assets	16		28		60		142
Adjustments to Operating Expenses	204		137		1,363		182
Other
DIRECTV intangible amortization (proportionate share)	376		392		1,188		392
Benefit-related (gain) loss, transaction financing        costs and other	416		—		822		(337)
Actuarial (gain) loss	(1,440)		(374)		(3,838)		(3,021)
Adjustments to Income Before Income Taxes	(444)		155		(465)		(2,784)
Tax impact of adjustments	(135)		2		(200)		(723)
Tax-related items	727		—		648		368
Adjustments to Net Income	$	(1,036)	$	153	$	(913)	$	(2,429)

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense, certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, actuarial gains and losses, significant abandonments and impairment, benefit-related gains and losses, employee separation and other material gains and losses. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

5

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, and Adjusted EBITDA Margin
Dollars in millions
	Third Quarter						Nine-Month Period
	2022			2021			2022			2021
Operating Income	$	6,012		$	6,237		$	16,505		$	21,003
Adjustments to Operating Expenses	204			137			1,363			182
Adjusted Operating Income	6,216			6,374			17,868			21,185
EBITDA	10,526			10,694			29,931			34,355
Adjustments to Operations and Support Expenses	188			109			1,303			40
Adjusted EBITDA	10,714			10,803			31,234			34,395
Total Operating Revenues	30,043			31,326			89,398			102,943
Operating Income Margin	20.0		%	19.9		%	18.5		%	20.4		%
Adjusted Operating Income Margin	20.7		%	20.3		%	20.0		%	20.6		%
Adjusted EBITDA Margin	35.7		%	34.5		%	34.9		%	33.4		%

Adjusted Diluted EPS
	Third Quarter					Nine-Month Period
	2022			2021		2022			2021
Diluted Earnings Per Share (EPS)	$	0.79		$	0.63	$	2.03		$	2.37
DIRECTV intangible amortization (proportionate share)	0.04			0.04		0.12			0.04
Actuarial (gain) loss1	(0.14)			(0.04)		(0.38)			(0.30)
Restructuring and impairments	0.01			0.01		0.08			0.01
Benefit-related, transaction and other costs1, 2	0.08			0.02		0.19			—
Tax-related items	(0.10)			—		(0.09)			(0.05)
Adjusted EPS	$	0.68		$	0.66	$	1.95		$	2.07
Less: Video and Other dispositions	—			(0.04)		—			(0.22)
Standalone AT&T Adjusted EPS3	$	0.68		$	0.62	$	1.95		$	1.85
Year-over-year growth - Adjusted	9.7		%			5.4		%
Weighted Average Common Shares Outstanding with Dilution (000,000)	7,647			7,506		7,605			7,491
1Includes adjustments for actuarial gains or losses associated with our pension and postretirement benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. We recorded total net actuarial gains of $1.4 billion in the third quarter of 2022. As a result, adjusted EPS reflects an expected return on plan assets of $0.8 billion (based on an average expected return on plan assets of 6.75% for our pension trust and 4.50% for our VEBA trusts), rather than the actual return on plan assets of $(3.4) billion (actual pension return of -15.4% and VEBA return of -12.2%), included in the GAAP measure of income. Adjustments also include the impact to our third-quarter 2022 benefit expense accruals that resulted from the prior-quarters 2022 remeasurements of plan assets and obligations, which included increases in the assumed discount rates.
2As of January 1, 2022, we adopted, through retrospective application, Accounting Standards Update (ASU) No. 2020-06, which requires that instruments which may be settled in cash or stock to be presumed settled in stock in calculating diluted EPS. While our intent is to settle the Mobility II preferred interests in cash, the ability to settle this instrument in AT&T shares will result in additional dilutive impact, the magnitude of which is influenced by the fair value of the Mobility II preferred interests and the average AT&T common stock price during the reporting period, which could vary from period-to-period. For these reasons, we have excluded the impact of ASU 2020-06 from our adjusted EPS calculation. The per share impact of ASU 2020-06 was to decrease reported diluted EPS $0.02 and $0.01 for the quarters ended September 30, 2022 and 2021, and $0.05 and $0.03 for the nine months ended September 30, 2022 and 2021, respectively.
3See Exhibit 99.4 for reconciliation of Standalone AT&T Adjusted EPS.

6

Net Debt to Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. Our Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt.

Net Debt to Adjusted EBITDA - 2022
Dollars in millions
	Three Months Ended
	Dec. 31,		March 31,		June 30,		Sept. 30,		Four Quarters
	20211		20221		20221		20221
Adjusted EBITDA	$	9,480	$	10,190	$	10,330	$	10,714	$	40,714
End-of-period current debt									9,626
End-of-period long-term debt									123,854
Total End-of-Period Debt									133,480
Less: Cash and Cash Equivalents									2,423
Net Debt Balance									131,057
Annualized Net Debt to Adjusted EBITDA Ratio									3.22
1As reported in Exhibit 99.4.

Net Debt to Adjusted EBITDA - 2021
Dollars in millions
	Three Months Ended
	Dec. 31,		March 31,		June 30,		Sept. 30,		Four Quarters
	20201		20211		20211		20211
Adjusted EBITDA	$	10,590	$	11,661	$	11,931	$	10,803	$	44,985
End-of-period current debt									23,712
End-of-period long-term debt									153,652
Total End-of-Period Debt									177,364
Less: Cash and Cash Equivalents									18,485
Net Debt Balance									158,879
Annualized Net Debt to Adjusted EBITDA Ratio									3.53
1As reported in Exhibit 99.4.

7

Supplemental Operational Measures

We provide a supplemental discussion of our business solutions operations that is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure
	Third Quarter
	September 30, 2022								September 30, 2021
	Mobility		Business Wireline		Adjustments1		Business Solutions		Mobility		Business Wireline		Adjustments1		Business Solutions
Operating Revenues
Wireless service	$	15,337	$	—	$	(13,115)	$	2,222	$	14,527	$	—	$	(12,468)	$	2,059
Wireline service	—		5,524		—		5,524		—		5,765		—		5,765
Wireless equipment	4,941		—		(4,082)		859		4,611		—		(3,798)		813
Wireline equipment	—		144		—		144		—		173		—		173
Total Operating Revenues	20,278		5,668		(17,197)		8,749		19,138		5,938		(16,266)		8,810
Operating Expenses
Operations and support	11,817		3,444		(9,730)		5,531		11,116		3,632		(9,167)		5,581
EBITDA	8,461		2,224		(7,467)		3,218		8,022		2,306		(7,099)		3,229
Depreciation and amortization	2,042		1,342		(1,685)		1,699		2,035		1,304		(1,688)		1,651
Total Operating Expenses	13,859		4,786		(11,415)		7,230		13,151		4,936		(10,855)		7,232
Operating Income	6,419		882		(5,782)		1,519		5,987		1,002		(5,411)		1,578
1Non-business wireless reported in the Communications segment under the Mobility business unit.
Results have been recast to conform to the current period's classification.

Supplemental Operational Measure
	Nine-Month Period
	September 30, 2022								September 30, 2021
	Mobility		Business Wireline		Adjustments1		Business Solutions		Mobility		Business Wireline		Adjustments1		Business Solutions
Operating Revenues
Wireless service	$	45,065	$	—	$	(38,534)	$	6,531	$	42,921	$	—	$	(36,868)	$	6,053
Wireline service	—		16,418		—		16,418		—		17,497		—		17,497
Wireless equipment	15,214		—		(12,582)		2,632		14,187		—		(11,803)		2,384
Wireline equipment	—		485		—		485		—		539		—		539
Total Operating Revenues	60,279		16,903		(51,116)		26,066		57,108		18,036		(48,671)		26,473
Operating Expenses
Operations and support	35,677		10,498		(29,352)		16,823		32,998		11,010		(27,265)		16,743
EBITDA	24,602		6,405		(21,764)		9,243		24,110		7,026		(21,406)		9,730
Depreciation and amortization	6,118		3,954		(5,047)		5,025		6,072		3,875		(5,044)		4,903
Total Operating Expenses	41,795		14,452		(34,399)		21,848		39,070		14,885		(32,309)		21,646
Operating Income	18,484		2,451		(16,717)		4,218		18,038		3,151		(16,362)		4,827
1Non-business wireless reported in the Communications segment under the Mobility business unit.
Results have been recast to conform to the current period's classification.

8